What Does an Executor Do?
If you have been chosen to be the executor of someone's estate, you have been given a great compliment and an immense responsibility. You have been entrusted with the precious duty of seeing to it that what remains after someone passes is distributed exactly as that person wished.
The executor (or if a woman, the "executrix") of an estate is the person who has accepted the responsibility of closing out the estate of someone who has passed away. Some estates are small, and the executor has only a few things to do. Large estates may need as long as a year or even longer to reach the point where inheritances can be distributed to the heirs.
Just as in all those old movies, the Last Will and Testament may be formally read soon after the funeral. The actual distribution to the beneficiaries rarely happens so soon. This is difficult for many beneficiaries to understand, and the necessary delay has caused many a conflict when the executor is a family member. In the case of large estates this is why many people choose to name a professional as the executor of their Last Will instead of a son or daughter, as a professional will not be under the same pressure as a close family member.
Something to keep in mind that confuses lots of people: If you held your parent's power of attorney, this does not automatically make you the executor of their estate. The power of attorney is designed to allow you to help your living parent (or whoever appointed you) with the chores of daily financial and medical life. At the moment the person who appointed you passed away, your authority under the power of attorney ceases to exist. The executor of that person's will is either named in the will or appointed by the Court if no one has been named.
In general, an executor is responsible for
1. Identifying and securing the assets of the estate. This can be as simple as putting a new lock on the door(s) to keep the contents secure, to searching for property, investments, insurance policies and other financial information. This can take many months if you are looking for property you are not certain about or if you must wait for statements to arrive so you can identify accounts.
2. The executor must establish the value of all these assets. This means that except for very small estates or for things that have already been valued, such as bank accounts, the executor will probably have to have the assets professionally appraised.
3. The executor is responsible for paying the debts of the person who has passed away from the assets of the estate. In the case of medical bills, it may be many months before all the bills have been accounted for. If there is not enough money in the estate to pay these bills, the executor is not personaly responsible to pay them. However, if there is not enough cash, but there are other assets with value, then the executor will usually have to liquidate assets to pay the bills. In most cases creditors have up to one year from the time the death was officially made public to come forward with their claims.
4. The executor must complete all tax filings and pay required state, local and federal taxes from the estate. The executor should also review or have reviewed the decedent's returns from the previous one or two years to be sure that taxes were paid properly. The IRS will certainly come back to the estate for any unpaid income taxes.
5. While all these details are unfolding the executor continues to remain responsible for preserving the value of the estate. Property, boats and automobiles must be maintained. Investments must be managed. If assets must be sold, the executor manages the sale and decides how the proceeds are to be managed.
6. When all the creditors and all the taxes have been paid, the executor then distributes the remaining estate to the beneficiaries in exactly the way the decedent specified in his or her Last Will and Testament. The executor does not have the authority to make changes to how the estate is distributed, even if the instructions of the Will do not seem to be fair.
As each state has its own processes, if you are the executor of someone's Last Will the best first step is to contact an attorney who practices "estate" or "probate" law for a short consultation. Be sure that the attorney you consult is licensed to practice in the state where your relative passed away. This attorney will be able to tell you specifically how you should proceed. The attorney should be paid from the assets of the estate, not your own personal money. Fees will vary from a few hundred dollars for a consultation to a great deal if you retain the attorney to manage the process for a large estate. Be sure to reach an understanding about fees before you proceed.
If you would like to read more about being an executor and administering an estate, these two books are easy to read and will walk you through the process. As with most things, we highly recommend that you read up before the event. You may not have time to do much reading when you are called into duty:
Executor's Guide: Settling a Loved One's Estate or Trust
Estate & Trust Administration For Dummies